Last night’s 2016 budget was targeted to small businesses with a range of measures to support companies with an annual turnover of less than $2 million. Titled “Growing Jobs and Small Business” this package is aimed to help small businesses invest more, grow more and employ more and it is certainly hoped by the government that these measures will provide a moderate stimulus for smaller companies to achieve this.
Hopes that the Government would provide greater investment in the form of new and targeted grants or incentives to support innovation in Australia were not realised and there was minimal content in the budget that will impact Australian innovators. While the Medical Research Future Fund remains policy from the 2014/2015 budget and the first distributions of $10m were announced in last night’s budget, this is still some way from the broad industry support needed for Australian companies involved in industry based research and development.
For those investing in innovation or Research and Development activities, the budget may provide a small benefit to those companies under this threshold.
Changes announced in the budget were as follows:
Reduced tax rate for small business
The tax rate for companies with an aggregated annual turnover of less than $2m will be reduced by 1.5% (ie from 30% to 28.5% for the 2015/16 income year. Companies undertaking Research and Development activities can still access the R&D tax offset at 45%. It is uncertain as to whether the government will then provide an increased after tax benefit from 15% to 16.5% or if it will reduce the 45% to 43.5% tax offset rate to maintain the net 15% after tax benefit. This offset is refundable for those companies in losses.
An additional benefit for small businesses is the ability to access the government’s accelerated depreciation changes. Companies can claim an immediate deduction for the cost of an asset they start to use or install ready for use to the value of $20,000. This may enable small businesses to purchase smaller scale assets with the ability to claim the deduction immediately. The asset will need to be acquired and installed ready for use before 30 June 2017. Assets valued over the $20,000 threshold will be depreciated at the same rates as currently.
Other small business benefits:
- Immediate deduction for business establishment costs and 5% tax discount for individual taxpayers with unincorporated businesses such as sole trader, trust or partnership with a turnover of less than $2m.
- The new regulatory framework for accessing the Crowd Source Equity Funding will enable innovative start ups to access these funding sources easier, creating a significant opportunity for start up innovators.
- Also, for those claiming R&D tax, there will be an additional $130.9m to the ATO to deliver an improved experience for clients and the Inspector General of Taxation’s office will receive additional funding to support its operations.
So it would seem we need to wait for the Tax White Paper for more information around the Australian innovation tax policy to hopefully provide more tax incentives to companies undertaking R&D activities in Australia.